Seeing Value In Trash, Harvest Power Raises $110M

Food scraps and trashed Christmas trees could one day be a source of a billion-dollar business, according to Harvest Power, a start-up that just raised $110 million to help convert organic waste to energy and fertilizer, VentureWire has learned.

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The company believes it can take organic waste and turn it into valuable energy.

The company’s waste-to-energy approach reflects a broad movement in the U.S. to get value from waste, rather than expensively transporting it to municipal dumps. Waste Management, the largest trash processor in the U.S. and a Harvest Power investor, has vowed to stop using landfills altogether in a number of years, and cities including San Francisco and Seattle are beginning to separate food and yard waste. Meanwhile, New York City is evaluating new waste-to-energy facilities for some of its trash.

The Waltham, Mass.-based company, founded in 2008, has some heavy hitters behind it. Generation Investment Management, a firm co-founded by Al Gore, is an investor, as are venture capital firms Kleiner Perkins Caufield & Byers and DAG Ventures. Leading the latest financing, a Series C round, was True North Venture Partners, a new investment firm launched by Michael Ahearn, interim chief executive of major solar panel manufacturer First Solar.

The deal is the 14th largest clean-technology deal since January 2011, according to Dow Jones VentureSource.

Harvest Power is hoping to replicate in North America what countries such as Germany and Spain have been doing for years. Worldwide, the capacity for processing municipal solid waste using anaerobic digestion–in which bacteria digest organic material and emit biogas, which can then be converted into compressed natural gas or burned for power, with the byproduct used as soil fertilizer–grew five-fold between 1995 and 2008, according to a 2010 report by Ljupka Arsova, formerly a research associate at the Earth Engineering Center at Columbia University. But the U.S. has only a couple of pilot facilities.

The U.S. generates about 40 million tons of food waste annually, representing about 12% of all waste, but less than a million tons is separated from the general trash, according to Nickolas Themelis, director of the Columbia earth engineering center. The country also generates the same amount of yard waste, half of which is collected and mostly composted, he said.

Richmond, British Columbia, which is in the metro Vancouver area, for example, started separating food scraps from the general trash about a year and a half ago, said Ted Townsend, spokesman for the city. “The reason we do it is metro Vancouver region is trying to reduce the amount of solid waste we produce. We have a solid waste landfill that’s filling up and we have to find alternatives,” he said.

Harvest Power gets revenue from selling fertilizer made at its composting facilities, by charging municipalities and other waste producers fees for picking up their trash, and by selling power from its power-generation facilities. It had less than $50 million in revenue last year, and plans to get to between $75 million and $100 million this year. It says that its fees for collecting trash are lower than those charged by landfills.

The company is currently building two commercial-scale power generation facilities in Canada. It will sell power for about 13 cents per kilowatt-hour to local utilities, cheaper than most renewables but more expensive than the prices for natural gas-powered electricity.

The company is also planning a waste-to-electricity facility in Florida for a theme park, and is planning to buy an organic-waste processing company in New Jersey, which would give it access to New York City organic waste streams, according to a Harvest presentation viewed by VentureWire

Harvest Power may also sell compressed natural gas to Waste Management, which could use the fuel to power its recycling and waste collection trucks, according to the presentation.

Sellew declined to give the company’s valuation. An investor who was contacted by the bankers but did not invest said that the valuation was “very high” and was in the hundreds of millions of dollars. “You can get there if you believe in the growth rate,” said the investor, who declined to be named.

The round is still open, said Sellew, but only a small amount more could be raised.

Although Harvest Power’s business is promising, there are some limitations, according to Andrew Soare, analyst for Lux Research, a research firm. When you use waste as a feedstock in an energy production plant, you have make sure the resource is reliable and stable, but that’s not easily achieved with waste, as its generation varies day to day, he said. Secondly, “as demand for waste grows, a negative price of feedstock will turn into a positive,” he said.

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